Gauntlet

Gauntlet is bringing dynamic-fee pools to Balancer. 

Dynamic-Fee Pools Coming to Balancer 

Balancer is introducing dynamic-fee pools. 

The DeFi keystone is partnering with Gauntlet, a simulation platform for on-chain risk management. Using techniques developed in algorithmic trading, Gauntlet’s involvement in the automated market maker will optimize returns for Balancer V2 liquidity providers. 

Making adjustments to trading fees means that liquidity providers can be paid fairly according to the current market conditions, rather than earning a fixed price. Fernando Martinelli, CEO at Balancer, said of the update: 

“It’s a privilege for Balancer Protocol and its liquidity providers to be able to tap on the galaxy brains of the Gauntlet team to maximize pool returns. The idea of dynamic-fee pools has been top of mind for Balancer for a long time. It is better for all stakeholders for fees to constantly adapt to the market conditions.“

He also suggested that fixed-fee pools may one day be a dated format for automated marker makers, drawing a comparison to taxis and ride-sharing apps. Gauntlet’s COO John Morrow also shared his enthusiasm for working with the Balancer team. He said: 

“Balancer’s vision for their V2 pools is perfectly suited for our simulation platform. We’re looking forward to launch, but we’re even more excited for what comes after – our optimization platform gets smarter as we incorporate more live data.”

Optimizations are a key point of focus for automated market makers due to the competitive nature of the market. Attracting sufficient liquidity to run a successful protocol can be challenging when liquidity providers can so easily move to another protocol. As such, it makes sense for automated market makers like Balancer to ensure that the rewards for each pool are sufficient. 

Research has shown that the price volatility of assets in a pool can help liquidity providers profit when there’s an appropriate trading fee. Gauntlet will look at volatility and other inputs leveraging off-chain automation to optimize the trading fees in Balancer’s pools. Gauntlet has built an optimization model that will provide parameter recommendations and integrate data fees. 

Balancer recently announced its V2 update, placing focus on capital efficiency and gas efficiency. The Gauntlet partnership shows a commitment to improving the protocol, where liquidity providers will be the first to benefit. According to the press release announcing the collaboration, there could be further improvements in the pipeline. “Updating trading fees is only just the beginning,” it read.

Disclosure: At the time of writing, the author of this feature had exposure to BAL in a cryptocurrency index.